Downtown Office Market Report CHICAGO. Mid-Year

Transcription

1 Downtown Office CHICAGO 2005 Mid-Year

2 Table of Contents page I. DOWNTOWN OFFICE MARKET OVERVIEW 1 Chicago CBD Submarket Map 3 Second Quarter Statistics 4 II. ABOUT COLLIERS BENNETT & KAHNWEILER INC. 5 CHICAGO 2005 Mid-Year

3 d o w n t o w n o f f i c e Mid-Year 2005 Headlines Despite average demand, the CBD witnessed healthy net absorption in the second quarter (positive 459,000 square feet) Tenants are still taking advantage of favorable market conditions by renewing early or relocating to upgraded space No new construction broke ground in the second quarter, but preliminary Block 37 plans were approved by the Chicago City Council Landlord concessions remain stable and are still very tenant-favorable Downtown Office Market Snapshot Mid-Year 2005 vs. Mid-Year 2004 Construction CBD Experiences Average Demand in the Second Quarter Chicago s central business district is broken into five submarkets and contains a total of more than 126 million square feet. The largest of these submarkets, the West Loop, has nearly 40 million square feet of office properties alone, and is experiencing an influx of tenants to its newly constructed Class A properties from older East and Central Loop buildings. In general, the market is still being negatively affected by first quarter s delivery of Hyatt Center at 71 South Wacker Drive and 111 South Wacker Drive and the large amount of both available space that was added to the market earlier in the year. The market s slow leasing velocity is resulting in historically high vacancy rates and excess supply. $35.00 $30.00 $25.00 $20.00 Central Loop/LaSalle and Activity At the end of the second quarter, the overall vacancy rate including both direct and sublease space totaled 19.3 percent, with Class A vacancies coming in the highest of the property segments at 20.5 percent. The West Loop exhibited the highest vacancy rate of all submarkets with 21.5 percent, not truly indicative of the heightened activity that the West Loop is experiencing. Again, this is primarily due to South Wacker Drive s new Class A construction deliveries. The overall Asking Full Service Rent Downtown Office and Activity direct vacancy rate totaled 17.6 percent. Sublease availabilities are improving and total only about 1.7 percent of the total vacancy. The Chicago CBD continues to draw key headquarters tenants. Netherlands-based Mittal Steel is searching for approximately 60,000 square feet for its North American headquarters. Originally considering Indianapolis as well, Chicago was ultimately selected and three buildings are currently in the running 1 S. Dearborn, 200 S. Michigan, and 30 W. Monroe. West Loop East Loop Lease Rate The investment market remains active in the Chicago CBD. Dallas, TX-based Prentiss Properties announced it will sell its entire portfolio of 16 office properties in the Chicago area, including its Central Loop property at 123 N. Wacker Drive. In addition, The John Buck Company has put 111 S. Wacker on the market, a new, one million-square-foot Class A property. N. Michigan Ave. River North 25% 20% 15% 10% 5% 0% Rate 1

4 d o w n t o w n o f f i c e Mid-Year 2005 The Chicago CBD experienced healthy gains in net absorption in the quarter, compensating for the negative net absorption posted in the first quarter. More than 459,000 square feet were absorbed, bring the year-to-date total to 39,328 square feet. The West Loop was the strongest of the submarkets with a total of nearly 305,000 square feet of positive net absorption. The Central Loop was the only submarket with negative net absorption (-224,107 square feet) in the second quarter. Construction No new construction has broken ground in the Chicago CBD in the second quarter. However, Mesirow Stein is expected to acquire a vacant property east of its 350 N. Clark and is in the planning stages for a mixed-use hotel, office and retail tower. In addition, Hines is reportedly in lease negotiations with law firm Kirkland & Ellis to anchor a new one million-square-foot office tower at 300 N. LaSalle. The Mills Corp. has received approval from the Chicago City Council on the Planned Development and Redevelopment Agreement for 108 North State, also known as Block 37. The infamous land on State between Randolph and Washington s has undergone numerous starts and stops with potential development. With the signing of CBS Channel 2 for 100,000 square feet in the proposed office tower, it appears that the mixeduse project will be a reality sometime in 2008 or basis with real estate taxes and operating expenses ranging from $15.50 to $18.50 per square foot. Current Class B asking rents range from $10.00 to $15.00 per square foot on a net basis with taxes and operating expenses ranging from $12.00 to $16.00 per square foot. Current Class C asking rents range from $19.00 to $23.00 per square foot on a gross basis. Notable Transactions - 1st Half of 2005 Tenant/Buyer Location Size (sf) Lease/Sale Seyfarth Shaw LLP 131 South Dearborn 294,175 Lease Robert Morris College 401 South State 270,000 Renewal/ Expansion Refco DePaul University 550 West Jackson Boulevard 55 East Jackson Boulevard 162,000 Renewal/ Expansion 126,000 Renewal/ Expansion Encyclopedia Brittanica 325 North State 72,107 Lease Michael Best & Friedrich LLP 180 North Stetson 44,000 Lease Chicago Teachers Union Merchandise Mart 41,600 Renewal Booz Allen Hamilton 225 W. Wacker 30,200 Lease Destiny Health Select Hotels Group ING Clarion Realty Services 200 West Monroe 200 West Monroe 209 South LaSalle 29,000 Lease 28,119 Lease 21,000 Lease Rents Current Class A asking rents range from $18.00 to $25.00 per square foot on a net represented Booz Allen Hamilton in a 30,200-square-foot lease at 225 W. Wacker Drive 2

5 d o w n t o w n o f f i c e Mid-Year 2005 Chicago CBD Submarket Parameters W. Oak St. N. Milwaukee Ave N. Halsted St. W. Kinzie St. W. Chicago Ave. N. Orleans St. N. Franklin St. N. Wells St. N. La Salle Blvd. N. Clark St. N. Dearborn St. RIVER NORTH W. Hubbard St. N. State St. E. Huron St. E. Walton Pl. E. Delaware Pl. E. Chestnut St. E. Superior St. E. Erie St. N. Michigan Ave. E. Chicago Ave. MICHIGAN AVENUE E. Ohio St. E. Illinois St. E. Ontario St. E. Grand Ave. Chicago River E. Wacker Dr. W. Lake St. W. Randolph St. EAST LOOP S. Des Plaines St. S. Jefferson St. WEST LOOP S. Clinton St. S. Canal St. S. Wacker Dr. W. Washington Blvd. W. Madison St. W. Monroe St. S. Franklin St. CENTRAL LOOP W. Adams St. W. Jackson Blvd. W. Van Buren St. S. State St. S. Wabash Ave. S. Michigan Ave. S. Columbus Dr. 41 Lake Michigan 290 W. Congress Pkwy. W. Harrison St. E. Balbo Dr. W. Polk St. SOUTH LOOP W. 9th St. W. Taylor St. W. Roosevelt Rd. 3

6 d o w n t o w n o f f i c e Mid-Year 2005 Chicago CBD Second Quarter Market Statistics Class Bldgs Total Inventory Sq. Ft. Direct SF Vacant Sublease SF Vacant Existing Properties Total Vacant SF Direct Rate Sublease Rate Total Rate - 2nd Quarter Total Rate Prior Qtr Total Direct Net Total Sublease Net Total Net - 2nd Qtr. Net YTD-Sq. Ft. DOWNTOWN: CENTRAL LOOP/LASALLE: A 20 18,339,825 3,597, ,514 3,881, % 1.6% 21.2% 19.1% (427,694) 40,561 (387,133) (336,578) B 33 16,686,419 2,683, ,520 2,812, % 0.8% 16.9% 17.6% 140,288 (8,073) 132,215 (108,838) C 12 2,377, ,807 1, , % 0.1% 20.7% 22.0% 27,964 2,847 30,811 13,781 Subtotal: 65 37,403,418 6,770, ,283 7,185, % 1.1% 19.2% 18.6% (259,442) 35,335 (224,107) (431,635) WEST LOOP: A 27 26,177,904 5,190, ,570 5,836, % 2.5% 22.3% 21.0% 661,139 (196,488) 464, ,873 B 30 10,363,703 1,879, ,509 2,172, % 2.8% 21.0% 20.1% (64,713) (23,953) (88,666) (350,362) C 21 3,205, ,085 3, , % 0.1% 16.3% 14.0% (71,096) 0 (71,096) (127,090) Subtotal: 78 39,746,944 7,586, ,863 8,529, % 2.4% 21.5% 20.2% 525,330 (220,441) 304, ,421 EAST LOOP: A 9 9,601,888 1,703, ,602 1,912, % 2.2% 19.9% 18.0% (227,626) 38,431 (189,195) (203,092) B 21 9,883,245 1,806,266 79,106 1,885, % 0.8% 19.1% 20.6% 127,857 26, ,669 (165,332) C 29 5,413,415 1,061,090 30,185 1,091, % 0.6% 20.2% 21.8% 88,446 (2,076) 86,370 77,845 Subtotal: 59 24,898,548 4,570, ,893 4,889, % 1.3% 19.6% 19.8% (11,323) 63,167 51,844 (290,579) N. MICHIGAN AVE.: A 11 6,848, ,883 86, , % 1.3% 13.7% 14.9% 52,147 31,074 83,221 69,447 B 18 5,452, , , , % 2.4% 12.7% 13.5% 32,416 11,180 43,596 61,076 C 6 555, , , % 0.0% 29.4% 30.2% 4, ,645 3,905 Subtotal: 35 12,856,800 1,576, ,465 1,794, % 1.7% 14.0% 15.0% 89,208 42, , ,428 RIVER NORTH: A 3 1,398, , , % 0.0% 13.8% 17.0% 21,362 24,004 45,366 91,732 B 18 7,730,220 1,260, ,988 1,478, % 2.8% 19.1% 21.5% 190,221 (4,012) 186, ,273 C 30 2,430, ,774 24, , % 1.0% 14.9% 13.4% (28,441) (8,099) (36,540) (47,312) Subtotal: 51 11,559,255 1,791, ,161 2,033, % 2.1% 17.6% 19.3% 183,142 11, , ,693 DOWNTOWN TOTAL: A 70 62,367,246 11,536,727 1,227,516 12,764, % 2.0% 20.5% 79,328 (62,418) 16, ,382 B ,116,027 8,190, ,758 9,039, % 1.7% 18.0% 426,069 1, ,023 (243,183) C 98 13,981,692 2,568,882 59,391 2,628, % 0.4% 18.8% 21,518 (7,328) 14,190 (78,871) TOTAL: ,464,965 22,296,458 2,135,665 24,432, % 1.7% 19.3% 526,915 (67,792) 459,123 39,328 4

7 About Inc. Inc. is a full-service real estate company offering office, retail, investment and industrial brokerage; development; and property/asset/facility management. Headquartered in Rosemont, Illinois, the firm also maintains offices in downtown Chicago; and Denver, Colorado. In total, some 140 persons are employed by the firm more than half of which are brokerage professionals. Headquarters Inc River Road Rosemont, IL / (main number) 847/ (fax) Principals David Kahnweiler, SIOR President and CEO Chairman, Colliers USA Daniel Arends David Bercu, SIOR Richard Berger, SIOR Robert Chodos Kevin Clifton William Fausone, SIOR, COO Jeffrey Kahan Gregory Pacelli, SIOR Jack Rosenberg, SIOR Walter Zegers Richard Berger Robert Chodos Directors of Corporate Office Group Kevin Clifton Director of Suburban Office Group James Degnan, SIOR Director of Industrial Services Group Jeffrey Kahan Director of Investment Services Group Michael L. Richwine Director of Retail Services Group Branch Offices Inc. 200 S. Wacker Drive Suite / (main number) 312/ (fax) Inc South Ulster, Suite 1000 Denver, CO / (main number) 303/ (fax) Colliers International Inc. is a shareholder in Boston-based Colliers International Property Consultants, a worldwide commercial real estate corporation. Colliers provides immediate access to more than 9,142 professionals in 248 offices throughout 57 countries on six continents. Colliers International is composed of the best local real estate companies in key world markets. Each member provides immense local insight as to customs, trends and cultural standards; a sound experiential base and an extraordinary staff of professionals committed to all Colliers International clients. Market coverage of Colliers International spans the Americas, Europe, Africa, the Middle East and Asia/Pacific. Brenda Crisp Colliers Real Estate Management Services Property and Facilities Management 5

8 200 S. Wacker Dr., Suite 3030 Chicago, Illinois Phone: Fax: